What is a defined benefit pension?
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In short: A workplace pension where your retirement income is based on salary and years of service, not on investment performance. The employer bears the investment risk and promises a set income — often a fraction of final or career-average salary for each year worked.
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Reviewed by Kaiser Khan
Defined benefit (DB) pensions — sometimes called final salary or career-average schemes — pay a promised income from your normal retirement age. A typical formula might be one-sixtieth of pensionable salary for each year of membership, so 30 years could equal half of career-average pay, plus a tax-free lump sum option in many schemes.
DB schemes are increasingly closed to new members in the private sector but remain common in the public sector. The Pension Protection Fund steps in if an employer becomes insolvent and the scheme lacks funds, though benefits may be capped. Transferring out to a defined contribution pot is possible in some cases but requires regulated advice if the transfer value exceeds £30,000.
For retirement planning in 2026/27, check your annual benefit statement for your projected pension at normal retirement age, whether the scheme offers early retirement reductions, and how it interacts with the State Pension. DB income is taxable but does not use up your pension annual allowance once you are only receiving benefits, not building them.
Primary source: gov.uk/workplace-pensions
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